What is the tax withholding of personal income tax? Must have tax declaration for not incurring withholding tax?

1. What is the tax withholding of personal income tax?

Tax withholding of personal income tax means that income payers calculate and withhold payable tax amounts from the incomes of taxpayers before paying incomes (Clause 1, Article 25, Circular No. 11/2013/TT-BTC).

Tax withholding of personal income tax includes many cases (different incomes) as follows:

-  Income of non-resident individuals

-  Incomes from lottery agency, insurance, agency; incomes from enterprise’s activities, lease of assets.

-  Tax withholding for incomes from capital investment.

-  Tax withholding for incomes from the stock transfer.

-  Tax withholding for Income from contribution capital of non-resident individuals.

-  Tax withholding for incomes from prize-winning.

-  Tax withholding for incomes from copyright or franchising.

- Tax withholding for other cases (10% withholding rate before paying incomes)

- Tax withholding for wages and salaries (pay personal income tax quarterly or monthly).

In the above cases, the article pays attention to tax withholding for personal income tax for incomes from wages and salaries. Or speaking in other ways, taxpayers pay withholding incomes (temporarily for paying tax) monthly, or quarterly, in particulars:

+ For resident individuals who sign labor contracts of three (3) months or more, including those signing such contracts with many entities, income payers shall withhold tax according to the Partially Progressive Tax Tariff, including the cases signing labor contracts of 03 months in many places.

+ For resident individuals who sign labor contracts of three (3) months or more but cease their jobs before such contracts expire, income payers shall also withhold tax according to the Partially Progressive Tax Tariff.

+ For foreigners working in Vietnam, income payers shall base themselves on the taxpayers’ working duration in Vietnam as written in contracts or documents on sending these foreigners to Vietnam to work to temporarily withhold tax according to the Partially Progressive Tax Tariff (for individuals who have worked in Vietnam for at least 183 days in a tax year) or the Whole Personal Income Tax Tariff (for individuals who have worked in Vietnam for less than 183 days in a tax year).

Therefore, tax withholding means that income payers calculate and withhold payable tax amounts from the incomes of taxpayers before paying. There are differences among incomes:

- Tax withholding for incomes from wages and salaries means temporarily paying to the end of the year and making settlements to overpaid/underpaid tax and requiring tax refund.

- Besides, there are some taxpayers' incomes that are withheld and paid into the state, for example prize-winning.

2. Must have tax declaration for not incurring withholding tax?

Sub-point d.1, Point d, Clause 6, Article 8, Decree No. 126/2020/ND-CP prescribes this problem as follows:

“Organizations and individuals paying incomes from salaries or wages shall make tax finalization declaration and make tax finalization on behalf of the authorizing individuals, regardless of withholding tax or not.  If paying no income, they are not required to make personal income tax finalization declaration.”

Therefore, paying incomes from salaries or wages shall make tax finalization declaration and make tax finalization declaration on behalf of the authorizing individuals, regardless of withholding tax or not.

It means that it is compulsory to make tax finalization declarations and make tax finalization in the tax year, regardless of income level.

At the same time, organizations and individuals must not make tax declarations of personal income tax in the tax year (from January 01 to the end of December 31).

3. What are the fines for failing a tax declaration?

Pursuant to Article 13, Decree No. 125/2020/ND-CP, warnings or fines shall be imposed depending on the time of late submission for the dossier (VND 02 million is the minimum level and VND 25 million is the maximum level), in particulars:

- Warnings: Late submission of the tax declaration dossier beyond the prescribed period from 01 days to 05 days under extenuating circumstances;

- A fine from VND 02 - 05 million: For the acts of late submission of the tax declaration dossier beyond the prescribed period from 01 day to 30 days,

- A fine from VND 05 - 08 million: For the acts of late submission of the tax declaration dossier beyond the prescribed period from 31 days to 60 days;

Note: In the case that individual who have arising tax refund of personal income tax but has the late submission of the tax declaration dossier shall not be imposed of administrative violations for the overdue term.

Here is the answer to the question: What is the tax withholding of personal income tax? Must have tax declaration for not withholding tax?